Wednesday will mark the 100th trading day of 2022, a year that will likely be remembered for its historic market turbulence as the megacap tech stocks that dominated the market for so long, since the dot-com bust The most punitive layoffs have taken place. ,
And after a painful short-term surge in the deep red with stocks once again in the red, key US benchmarks were set to finalize on Wednesday one of the worst starts of a year in market history. Used to be.
According to Dow Jones market data, the S&P and Dow are on track for the first 100 trading days, their worst since 1970. And for the Nasdaq 100, it’s the worst ever.
After years of outperformance, the Nasdaq has traded essentially straight lower for the past two months, losing nearly a quarter of its value, with only a few brief but powerful rallies breaking off relentless selling. Since March, the index has seen five countertrend rallies of 4% or more, according to Matt Weller, a market technician who studies near-term technical trends.
Analysts blame all the usual suspects: The inevitable burden of inflation, which taxes a company’s future earnings, cheapens their value in the present. The hawkish Federal Reserve, which is content to stand back and refrain from intervening to try to slow or reverse the bloodshed. And of course the war in Ukraine, which has contributed to high food and energy prices, and the shutdown in China, which has wreaked more havoc on fragile global supply chains.
Billionaire investor Bill Ackman says the Fed isn’t doing its job, so markets are bursting
For investors who are contemplating whether or not to try to snag a falling knife, there are plenty of references that can help put 2022 sales in perspective.
For example, Ryan Detrick of LPL Financial recently pointed out that historically, mid-term election years have been tough for markets. US stocks are down more than 17% at an average peak-to-trough. On average, market downturns during these years tend to occur later in the year.
Shifting to discuss some historical points of interest for the S&P 500, the highest popular US equity benchmark, it is worth noting that the index has been down for seven consecutive weeks this year, a streak seen just three times in history: 2001. , during the 1980s and 1970s.
In terms of volatility, the market has also been extremely interesting this year: the S&P 500 has posted intraday swings of 2% or more in about 40% of the days so far in 2022.
The selling momentum, and sentiment that the US economy will slip into recession sometime next year, has prompted a gloomy outlook on the markets. Few, if any, market bulls have come forward to call for a downside. And there’s a lot of data out there for caution.
Before the most recent post-market correction attempt faded on Tuesday, a team of analysts at Jefferies analyzed forward returns for the S&P 500 a year after a period of historical loss to test conventional wisdom. prepared a note. Often rewarding daring plunge buyers.
In the note, analysts examine periods where the S&P 500 dropped 10%, 15%, 20% and 25% from its previous highs. Using market data from the 1950s, analysts found that, historically speaking, US stocks typically do not recoup their losses within a year until the index clears the 25% selloff mark. Do.
Perhaps this is one reason why professional money managers are so cautious. Bank of America’s most recent Global Fund Managers Survey showed that fund managers have increased their cash position by 5% over the past month, reaching a 20-year high in May. Recent surveys have also confirmed the gloomy climate by showing that a gauge of financial market risk is at its highest level since Merrill Lynch began the survey, with fund managers expecting slow economic growth and rising rates weighing on stocks. Hope to continue.
This does not mean that some bulls are not left. A team of analysts at JPMorgan recently told clients that up to $250 billion of “rebalancing” flows from bonds and into equities could trigger another brief rebound in shares before the end of the second quarter.
Credit: www.marketwatch.com /